Answer the questions about fixed assets:
- Explain the differences and similarities between personal property, real property, intangible property, and natural resources. Also, provide an example of each type of asset.
- What is the difference in the recovery periods used by MACRS and those used under generally accepted accounting principles (GAAP)?
- What are the two depreciation conventions that apply to tangible personal property under MACRS?Explain each.
- What is Section 179? Explain the two limitations placed on the §179 deduction.
- What is a §197 intangible?How do taxpayers recover the costs of these intangibles?
- Jose purchased a delivery van for his business through an online auction. His winning bid for the van was $24,500. In addition, Jose incurred the following expenses before using the van: shipping costs of $650; paint to match the other fleet vehicles at a cost of $1,000; registration costs of $3,200 which included $3,000 of sales tax and a registration fee of $200; wash and detailing for $50; and an engine tune-up for $250. What is Jose’s cost basis for the delivery van?
- GMW Corporation acquired and placed in service the following assets during the year:
- At the beginning of the year, Winifred began a calendar-year dog boarding business called Gizzy’s’s Palace. Winifred bought and placed in service the following assets during the year:
|
Asset |
Date Acquired |
Cost Basis |
|
3/23 |
$5,000 |
|
|
Dog grooming furniture |
5/12 |
$7,000 |
|
Pickup truck |
9/17 |
$10,000 |
|
Commercial building |
10/11 |
$270,000 |
|
Land (one acre) |
10/11 |
$80,000 |
Assuming Winifred does not elect §179 expensing and elects not to use bonus depreciation, answer the following questions:
- What is Winifred’s year 1 depreciation deduction for each asset?
- What is Winifred’s year 2 depreciation deduction for each asset?
|
Asset |
Date Acquired |
Cost Basis |
|
Computer equipment |
2/17 |
$10,000 |
|
Furniture |
5/12 |
$17,000 |
|
Commercial building |
11/1 |
$270,000 |
Assuming GMW does not elect §179 expensing and elects not to use bonus depreciation, answer the following questions:
- What is GMW’s year 1 cost recovery for each asset?
- What is GMW’s year 3 cost recovery for each asset if GMW sells all of these assets on 1/23 of year 3?
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